In a report despatched to Rigzone by Normal Chartered Financial institution Commodities Analysis Head Paul Horsnell this week, analysts on the financial institution, together with Horsnell, mentioned U.S. tariffs on Canadian oil would doubtless be counterproductive.
“The U.S. imported a mean of 6.6 million barrels per day of crude oil within the first 10 months of 2024, of which 4.0 million barrels per day was heavy oil to be used in upgraded refineries with cracking models,” the analysts said within the report.
“Heavy oil can’t simply be substituted with the sunshine oil that makes up most of U.S. shale oil manufacturing; such a change would create a big lack of optimization within the extremely costly cracking models that require feed from vacuum distillation of the heavy residual obtained by easy distillation,” they added.
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“Canada offered 75 p.c of U.S. heavy crude oil imports in 2024, with its market share having steadily elevated since 2000 … squeezing out flows from Mexico, Venezuela, and Colombia,” they continued.
“If one have been devising a tariff regime for oil imports with the goal of minimizing the pass-through of the tariff to retail costs, the tariffs would ideally goal essentially the most simply substitutable flows into essentially the most aggressive retail space,” they went on to state.
The analysts famous within the report that, within the U.S., that will be mild candy crude oil imports into the Gulf Coast refining system. They mentioned the opposite finish of that scale is the two.2 million barrels per day of Canadian heavy imports into Midwest refineries, which they identified within the report is greater than half of Canada’s whole crude oil exports to america.
“Canada has equipped 99.89 p.c of all heavy imports into Midwest refineries over the previous 10 years,” the analysts said within the report.
“The low substitutability of this circulation implies {that a} tariff would largely feed by means of to native retail costs,” they added.
In one other report despatched to Rigzone by Horsnell this week, analysts at Normal Chartered Financial institution, together with Horsnell, famous that “focus will shift to February 1, when President Trump has mentioned he plans to impose tariffs of as much as 25 p.c on Mexico and Canada”.
“The timing, scope, and affect of tariffs stay unsure,” the analysts added within the report.
In an evaluation piece despatched to Rigzone on Tuesday, Michael Brown, Senior Analysis Strategist at Pepperstone, mentioned, “tariff rhetoric stays prone to ramp-up within the close to future, particularly forward of the rumored February 1 date for tariffs to be imposed on Canada and Mexico”.
Rigzone has contacted the Trump transition workforce, the White Home, the U.S. Division of Vitality, and the American Petroleum Institute for touch upon the Normal Chartered reviews and Brown’s evaluation piece. On the time of writing, not one of the above have responded to Rigzone but.
In a White Home press briefing by White Home Press Secretary Karoline Leavitt, which was transcribed on the White Home web site on January 29, Leavitt was requested, “[President Trump’s] alluded to each the potential for tariffs for Canada and Mexico but in addition China to take impact on [February 1] … What’s he fascinated by that … Ought to these nations count on that on the first”.
“He was requested and answered this query this previous weekend when he took lots of questions from the press, and he mentioned that the February 1st date for Canada and Mexico nonetheless holds,” Leavitt responded within the briefing.
When pressed within the briefing “in regards to the China 10 p.c tariff that … [Trump] additionally had mused about final Tuesday going into impact on the identical date”, Leavitt mentioned “the president has mentioned that he’s very a lot nonetheless contemplating that for February 1st”.
To contact the writer, e mail andreas.exarheas@rigzone.com
